Hits: 19

15 July 2020

Manolete – Competition

Share Price 395p

Mkt Cap £172m

Conflict Disclosure: No Holding 

  • Events The negative dossier from Winnifrith was effectively rebutted yesterday, which Tom Winnifrith serves to confirm by resorting to foul language on Twitter. What hasn’t changed, however, is Rosenblatt parking a tank on Manolete’s lawn. They have named their insolvency claims solution Islero, which is also the name of the bull that slayed the famous bullfighter Manolete. The statement clearly states it will offer a “cheaper” and more “flexible” alternative, which for an insolvency practitioner with a fiduciary duty will likely be obligatory to consider.
  • Estimates Manolete’s ROE of 53% fell to 31% in 2019. 24% is expected in 2020, recovering to 32% in 2021.
  • Valuation With equity of £35m the shares trade at 4.9X book value which suggests that despite the 25% share price fall the shares may not be discounting a more competitive environment.
  • Conclusion The company came to market at 175p in December 2018. 18 months later the shares are 125% above that level. Should downgrades happen for 2020 the shares are still vulnerable. RBGP trades on a PE of 8.4X. There could be an interesting switch here.

3 July 2020

Manolete – FY Results

Share Price 510p

Mkt Cap £222m

Conflict Disclosure: No Holding 

  • Results Revenue up 36% to £18.7m. Underlying PBT up 40% to £9.5m. EPS up 70% to 17p. DPS 3p. Net cash £0.9m and £12m facility available. In the 3 months to June new case referrals were up 90%. 40% of the £18.7m revenue was realised revenue which was up 9% year on year.
  • Estimates Results are in line. EPS growth in the current year is expected to be 33%.
  • Valuation ROE is 31% 6.3X book value.PE 27X
  • Conclusion The company is at pains to suggest it won’t need to raise more capital in the face of accelerating referrals, which will depend on how quickly existing cases settle. The valuation appears to be discounting perhaps two year future growth which is up with events.

4 May 2020

Manolete  – Update

Share Price 445p

Mkt Cap £194m

Conflict Disclosure: No Holding

 

  • Update  Case enquiries continues to grow strongly. January’s 371% increase has been followed by 89%, 56% and 104% increase for the 3 months to April. Signed cases have more than doubled for the last two months. Case completions is also growing. The statement suggests that Manolete will benefit from disruption.

 

  • Estimates 33% revenue growth is expected in the year to March 20 followed by 42% to March 21 and 33% profit growth to £13.5m. 30% ROE.

 

  • Valuation The shares dipped in March to 238p since when they have recovered 87% to 445p. PE 23.5X, Price/NAV 6.9X

 

  • Conclusion a 30% ROE would perhaps merit a valuation of 4X book value while the shares trade at 6.9X book value suggesting the shares are pricing in c 70% growth from here off the existing capital base. With a £20m HSBC facility available on top of the £30m equity the company should be able to achieve that without issuing further equity, meaning the shares are perfectly priced.

 

21 November 2019

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Manolete – H1 Results

Share Price 510p

Mkt Cap £222m

Conflict Disclosure: No Holding

  • Results The words “these are a strong set of results” always fills me with fear. As if we won’t be able to tell from the numbers. Net Asset Value is £30.9m while the company has an unutilized £20m facility from HSBC. This NAV produces revenue in H1 of £7.5m and PBT of £4.3m. EPS 7.9p. Strong investment in new cases. Of the £7.5m revenue £5.6m was derived from fair value movements.
  • Estimates FY estimates anticipate £10.2m PBT for FY to March which looks reasonable in the light of £4.3m in H1.
  • Valuation The company achieves a c. 30% ROE so may be expected to trade at perhaps 3-4X book value which is around half the current share price.
  • Conclusion This is a fund which achieves a high ROE because of its specialist niche and capital light model.  It is priced as a growth stock. The markets tendency to confuse funds with growth stocks is what attracted the shorters to Burford.  This valuation is out of kilter with reality.

27 June 2019

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Manolete Partners – FY Results 

Share Price 527p

Mkt Cap £229m

Conflict disclosure: No Holding

  • Results – Revenue up 30% to £13.8m and pre exceptional EBIT up 77% to £7.2m. EPS up 70% to 13p. Investment book up 70% to £18.2m while the company still has cash of £9.7m giving gross assets of £32m. RO opening E was 28%. A record new case pipeline results in a confident outlook
  • Estimates –. PBT is ahead of the £6.6m consensus. A 38% increase is anticipated going forwards for the current year
  • Valuation Per 31X yield 0.6%. 6.8X book value for an ROE of 28% suggests the share price may be discounting a doubling of the return after the new capital is added from the historic £19m. So that’s about 150% uplift
  • Conclusion  The easy money has been had here and with the share price discounting 150% uplift in profits shareholder returns may become harder

14 December 2018

Manolete Partners – IPO 

Share Price 175p

Mkt Cap £76.3m

  • Prospectus – This insolvency litigation funder makes fabulous returns. Since 2012 the worse ROI has been 154% and last year it made 366%. With insolvencies increasing this could be a good bear market stock. I checked them out with an ex colleague at the insolvency department at Deloittes and was surprised to find they view this company as a very expensive way of effecting prosecutions. So perhaps ultimately the business could at some point suffer pricing pressure. But as a market leader in this niche they look well placed for a while.
  • Valuation  The NAV post IPO is £24m and the share have been placed at c.3X book value. Last year the company delivered 42% ROE
  • Conclusion The company is small with only 10 staff so key man risk is significant together with other long term risks but this looks to be accommodated within the price.  If the company can continue to deliver 40% ROE using its debt facility from HSBS at LIBOR +2.75% the company would produce £10m of PAT.  The placing price is 7.6X this PAT figure so there looks to be considerable upside.  And for those who see this as a bear market play lets remember that in the 1696 crash 70% of the 140 companies in Scotalnd and England went under.